Takeaways
- Judge Richard Leon’s scrutiny of the DOJ’s proposed consent decree in the Aetna/CVS transaction is not expected to affect future antitrust settlements, according to healthcare specialists who spoke with Reorg M&A.
- According to Thomas Miller, a resident fellow at the American Enterprise Institute, Judge Leon’s more proactive approach “might be idiosyncratic related to his particular judicial philosophy - as opposed to some longer, broader trend where we’re going to see a more active role by the courts.”
- Judge Leon created a stir when he characterized the DOJ and the companies’ initial efforts to seek his requested approval as a “rubber stamp” for the deal. The judge has since softened his stance considerably after CVS pledged to maintain the separateness of certain aspects of Aetna’s business for the duration of the court’s Tunney Act review.
While case-specific opposition has provided a basis for Judge Richard Leon’s scrutiny of the Aetna/CVS transaction, his review of the DOJ’s proposed consent decree also reflects an idiosyncratic judicial approach, according to healthcare specialists. Leon’s review is not expected to affect future antitrust settlements in a significant way, they said.
“He’s probably stretching his role beyond what is customary,” said Thomas Miller, a resident fellow at the American Enterprise Institute, where he studies healthcare policy. “It might be idiosyncratic related to his particular judicial philosophy - as opposed to some longer, broader trend where we’re going to see a more active role by the courts regardless of what type of approvals you get at the regulatory federal level.”
Leon’s role is “definitely unusual,” agreed Patrick Souter, of counsel at Gray Reed & McGraw. Souter noted that public opposition from the American Medical Association, or AMA, and others has provided basis for closer judicial scrutiny of the proposed settlement. “The size of the merger and the outcry from the different groups opposing it would seem to justify his concerns and the need for further review,” said Souter, who is also a professor of healthcare studies at Baylor University School of Law.
Judge Leon created a stir when, during an initial Tunney Act
hearing held on Nov. 29, he commented that he was dissatisfied that the DOJ and companies were treating his requested approval as a “rubber stamp” for the deal. The Tunney Act requires federal courts to review consent decrees in civil antitrust cases filed by the DOJ to ensure that the remedy proposed in the consent is in the public interest.
Judge Leon thereafter softened his stance considerably, after CVS
pledged in December to undertake four behavioral
commitments aimed at maintaining the separateness of certain aspects of Aetna’s business for the duration of the court’s Tunney Act review. Judge Leon has appeared pleased with CVS’ direct response to his concerns, including through his
granting of CVS’ request to file quarterly declarations in lieu of reporting to a monitor. However, third-party opposition to the deal still seems to be on his mind. The judge has made specific references to opposition comments filed by the AMA in multiple hearings, including on
Dec. 3 and
Nov. 29.
The DOJ was joined in its
complaint and
proposed final judgment by the states of California, Florida, Hawaii, Mississippi and Washington. Those five states were among 12 total states identified in the complaint as regions in which there was likely to be a significant increase in concentration in the sale of standalone individual Medicare Part D prescription drug plans, absent the agreed-upon divestiture of Aetna’s individual PDP business to WellCare.
Tim Greaney, a law professor at UC Hastings who previously worked at the DOJ Antitrust Division, said there has been “enough noise” around the Aetna/CVS case to create greater sensitivity toward bringing vertical cases in future transactions. Greaney testified in California about the merger, and his work has been cited in the AMA’s filings of opposition.
However, the lack of case law or precedent makes it difficult for the federal government to bring a vertical case, no less to prevail. “It may be there is some greater attention that is going to be paid, but it is a tough slog to bring these cases and they are very fact-dependent,” he said.
--Ryan Lynch, Patrick Flavin and Alexandra Wilts